[Federal Register Volume 64, Number 68 (Friday, April 9, 1999)]
[Notices]
[Pages 17336-17342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8927]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-583-829]
Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Round Wire from Taiwan
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: April 9, 1999.
FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell at
(202) 482-1442 or (202) 482-3813, respectively, Group 1, Office of AD/
CVD Enforcement 2, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, D.C. 20230.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to Department of Commerce (Department)
regulations refer to the regulations codified at 19 CFR Part 351 (April
1998).
Final Determination
We determine that stainless steel round wire from Taiwan is being
sold, or is likely to be sold, in the United States at less than fair
value (LTFV), as provided in section 735 of the Act. The estimated
margins are shown in the Suspension of Liquidation section of this
notice.
Case History
The preliminary determination in this investigation was issued on
November 12, 1998. See Notice of Preliminary Determinations of Sales at
Less Than Fair Value and Postponement of Final Determinations--
Stainless Steel Round Wire From Canada, India, Japan, Spain, and
Taiwan; Preliminary Determination of Sales at Not Less Than Fair Value
and Postponement of Final Determination--Stainless Steel Round Wire
From Korea, 63 FR 64042 (November 18, 1998) (preliminary
determination). Since the preliminary determination, the following
events have occurred:
In January and February 1999, we conducted on-site verifications of
the questionnaire responses submitted by respondent Tien Tai Electrode
Co., Ltd. (Tien Tai) and its affiliate 1 Kuang Tai Metal
Industry Co., Ltd. (Kuang Tai).2
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\1\ As explained in the preliminary determination, for purposes
of this investigation we are treating Tien Tai and Kuang Tai as a
single entity.
\2\ Verification of respondent Rodex Fasteners Corp. (Rodex) was
conducted in September and October 1998, prior to the issuance of
the preliminary determination.
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The petitioners 3, Tien Tai/Kuang Tai, and Rodex
submitted case briefs on February 23, 1999, and rebuttal briefs on
March 2, 1999. We held a public hearing on March 11, 1999.
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\3\ The petitioners are ACS Industries, Inc., Al Tech Specialty
Steel Corp., Branford Wire & Manufacturing Company, Carpenter
Technology Corp., Handy & Harman Specialty Wire Group, Industrial
Alloys, Inc., Loos & Company, Inc., Sandvik Steel Company, Sumiden
Wire Products Corporation, and Techalloy Company, Inc.
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Scope of Investigation
The scope of this investigation covers stainless steel round wire
(SSRW). SSRW is any cold-formed (i.e., cold-drawn, cold-rolled)
stainless steel product of a cylindrical contour, sold in coils or
spools, and not over 0.703 inch (18 mm) in maximum solid cross-
sectional dimension. SSRW is made of iron-based alloys containing, by
weight, 1.2 percent or less of carbon and 10.5 percent or more of
chromium, with or without other elements. Metallic coatings, such as
nickel and copper coatings, may be applied.
The merchandise subject to this investigation is classifiable under
subheadings 7223.00.1015, 7223.00.1030, 7223.00.1045, 7223.00.1060, and
7223.00.1075 of the Harmonized Tariff Schedule of the United States
(HTSUS). Although the HTSUS subheadings are provided for convenience
and customs purposes, the written description of the merchandise under
investigation is dispositive.
Period of Investigation
The period of the investigation (POI) is January 1, 1997, through
December 31, 1997. This period corresponds to each respondent's four
most recent fiscal quarters prior to the month of the filing of the
petition (i.e., March 1998).
[[Page 17337]]
Fair Value Comparisons
To determine whether sales of stainless steel round wire from
Taiwan to the United States were made at LTFV, we compared the export
price (EP) to the normal value. Our calculations followed the
methodologies described in the preliminary determination, except as
noted below and in company-specific analysis memoranda dated April 2,
1999, which have been placed in the file.
Export Price
We used the same methodology to calculate EP as that described in
the preliminary determination.
Normal Value
We used the same methodology to calculate normal value as that
described in the preliminary determination, except that for Tien Tai,
we revised the reported credit expenses to correct an error in the
credit period.
Cost of Production
We used the same methodology to calculate cost of production (COP)
as that described in the preliminary determination, except in the
following specific instances:
1. Rodex
We corrected two errors made in the preliminary determination
with respect to a year-end auditor's adjustment to the reported
labor and overhead costs. See Rodex comment 3.
2. Tien Tai
We made an adjustment for wire rod input costs. We included in
general expenses (1) the value of stock bonuses made to employees
and directors, (2) R&D expenses, (3) certain foreign exchange gains
and losses, and excluded from general expenses certain non-operating
income. Further, we reduced the cost of sales of the companies by
the verified inter-company transactions. Finally, we eliminated the
double-counting of packing expenses of Kuang Tai.
Unit of Weight for Tien Tai
We corrected a clerical error in the margin program for Tien Tai
involving the unit of weight used to calculate the total amount of
dumping.
Currency Conversions
As in the preliminary determination, we made currency conversions
into U.S. dollars based on the exchange rates in effect on the dates of
the U.S. sales, in accordance with section 773A of the Act. We relied
on exchange rates certified by the Federal Reserve Bank.
Interested Party Comments
A. Tien Tai/Kuang Tai
Comment 1: Costs for Inter-Company Raw Material Purchases. The
petitioners argue that the extent of Tien Tai's purchases of wire rod
from Kuang Tai was understated, and not disclosed until verification.
The petitioners also contend that because Tien Tai and Kuang Tai are a
single entity for purposes of this investigation, they should have
reported their respective acquisition cost of the wire rod in question
rather than the inter-company transfer price. Finally, the petitioners
argue that there were also critical flaws in the reporting of costs for
wire rod Kuang Tai obtained from Walsin, an affiliated supplier.
Specifically, they argue that: (1) the reported costs of manufacturing
of certain grades of rod supplied by Walsin were understated relative
to the costs on Walsin's books; (2) Walsin's reported selling, selling,
general and administrative (SG&A) expenses did not include
miscellaneous general expenses and contained errors in the allocation
of selling expenses, and (3) Walsin's reported interest expense did not
include amounts for long-term interest expense. According to the
petitioners, these omissions warrant the rejection of the submitted
cost data in its entirety and the application of adverse facts
available. In the alternative, the petitioners request application of
partial facts available with respect to the COP and constructed value
(CV) data.
The respondents argue that the application of adverse facts
available is not warranted. According to the respondents, the
Department has verified the correct quantity and value of transfers of
wire rod among Tien Tai and Kuang Tai, as well as the wire rod obtained
by Kuang Tai from Walsin, and has all the necessary data to value these
inputs.
DOC Position: We disagree with the petitioners that the application
of total facts available is warranted. While the Department found
discrepancies between the questionnaire responses and the companies'
records with respect to the transfers of stainless steel wire rod
between Tien Tai and Kuang Tai, the discrepancies were minor.
With respect to the valuation of these inputs, we note that section
773(f) of the Act and section 351.407 of the Department's regulations
provide that we will normally determine the value of a major input
obtained from an affiliate based on the higher of transfer price,
market price or cost of production. However, in cases where the
transfer of inputs occurs between companies that the Department has
collapsed (i.e., has determined to treat as a single entity for
purposes of an antidumping proceeding), the Department does not
consider the transfer price or market value in the valuation of the
inputs. Rather, the valuation of transactions between the collapsed
companies is based on the actual cost to the group as a whole. See
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products
from Korea: Final Results of Antidumping Duty Administrative Reviews,
62 FR 18404, 18429-18431 (April 15, 1997).4 Under the above
standard, and because neither Tien Tai nor Kuang Tai is a producer of
wire rod, the Department's preference in this case would have been to
rely on the affiliate's acquisition cost of the wire rod inputs.
Although we discovered at verification that the respondents had not
submitted these costs, we also determined, by examining purchases of
several different grades of wire rod, that the reported transfer price
was consistently greater than or equal to the acquisition cost. See
Tien Tai/Kuang Tai cost verification report, dated February 12, 1999,
at exhibits 20, 22, 37, and 38. Therefore, as facts available, we have
relied on the reported transfer price to value the inputs in question.
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\4\ We note that our determination was also upheld by the Court
of International Trade. See AK Steel Corp. v. United States, Slip
Op. 98-159, 1998 Ct. Intl. Trade LEXIS 182, at *28-32 (Ct. Int'l
Trade, Nov. 23, 1998).
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With respect to Walsin, we find that the omissions noted do not
warrant the use of adverse facts available. These are relatively minor
errors that are easily corrected based on verified data on the record.
See memorandum from Peter Scholl to Neal Halper, dated April 2, 1999,
which has been placed on the record.
Comment 2: Adjustments to G&A. The petitioners make the following
arguments with respect to adjusting the respondents' general and
administrative (G&A) expenses and G&A ratio.
First, the petitioners argue that Tien Tai has not established
which foreign exchange gains were associated with manufacturing
activities. According to the petitioners, the Department's practice is
to disallow sales-related exchange rate gains from the calculation of
G&A expenses when these are not shown to be related to manufacturing
activities, and therefore the Department should disallow the exchange
gains reported by the respondents. The petitioners add that Tien Tai's
exchange losses, as well as Kuang Tai's exchange gains and losses,
should be accounted for as part of total interest expenses.
Next, the petitioners contend that the Department should disallow
various claimed offsets to G&A expenses. According to the petitioners:
(1) an offset for repair income should be rejected because the income
does not
[[Page 17338]]
stem from the company's core business; (2) Kuang Tai double counted the
offset for scrap sales by reducing both the cost of manufacturing and
G&A expenses by the same amount; and (3) miscellaneous other offsets
are unrelated to production, and should be rejected.
The petitioners also argue that the respondents failed to include
certain items in the reported G&A expenses, namely: (1) cash and stock
bonuses to employees, directors and supervisors, (2) research and
development (R&D) expenditures, and (3) bad debt. Further, the
petitioners argue that the Department should reduce the cost of sales
denominator in the G&A calculation to eliminate the effect of inter-
company transactions. Finally, the petitioners argue that the
Department should revise the cost of goods sold denominator used to
calculate the G&A ratio to exclude any packing costs not otherwise
included in the cost of manufacturing.
The respondents address some, but not all, of the petitioners'
points regarding G&A. First, the respondents argue that their reporting
of scrap revenue is correct, and that no adjustment is necessary to the
G&A ratio in this regard. Next, the respondents claim that the
Department verified all income offsets to G&A, and should not reject
these offsets. The respondents also claim that bad debts are associated
with third country sales, and should therefore not be allocated to
subject merchandise. Further, the respondents claim that the Department
verified the proper classification of reported G&A expenses, including
R&D expenses.
With respect to the elimination of inter-company transactions from
the cost of goods sold denominator used in the calculation of the G&A
ratio, the respondents argue that the Department should eliminate the
transactions based on the price paid by Tien Tai and Kuang Tai to
unaffiliated suppliers for the inputs in question, rather than the
resale price for those inputs charged by Tien Tai and Kuang Tai to each
other.
DOC Position: We address the petitioners' various points in turn.
First, we agree with the petitioners with respect to foreign exchange
gains and losses. It is the Department's practice to distinguish
between exchange gains and losses generated by sales transactions and
those generated by loans payable and the purchases of production
inputs. See Notice of Final Results and Partial Rescission of
Antidumping Duty Administrative Review: Certain Welded Carbon Steel
Pipe and Tube from Turkey, 63 FR 35190, 35198 (June 29, 1998). The
Department typically excludes from the COP and CV calculation those
foreign exchange gains and losses generated by sales transactions
because we do not consider them to relate to the manufacturing
activities of the company. See Notice of Final Determination of Sales
at Less Than Fair Value: Steel Wire Rod from Trinidad and Tobago, 63 FR
9177, 9182 (February 24, 1998). Even though it was requested by the
Department in its supplemental Section D questionnaire dated September
30, 1998, Tien Tai failed to segregate foreign exchange gains between
those generated by sales transactions, purchase transactions, and loans
payable. We have therefore excluded all of Tien Tai's foreign exchange
gains from the calculation of COP and CV. We further agree that Tien
Tai's foreign exchange losses and Kuang Tai's foreign exchange gains
and losses should be included in the COP and CV calculations because
none of these amounts were shown to relate to sales transactions.
We agree with the petitioners in part concerning their arguments on
G&A. We agree that machinery repair income is not part of the general
operations of the company and therefore should be excluded from the
calculation of G&A expenses. We agree that Kuang Tai double counted the
offset for scrap sales by both reducing the cost of manufacturing and
G&A expenses by the same amount. Therefore, we have excluded scrap
income from the G&A expense calculation. We disagree with the
petitioners' argument regarding the other items listed as non-operating
income and expense in the G&A expense calculation, because we find that
they are related to the company's general operations. See Final Results
and Partial Rescission of Antidumping Duty Administrative Review:
Certain Pasta from Italy, 64 FR 6615, 6627 (February 10, 1999) (``G&A
expenses are those expenses which relate to the general operations of
the company as a whole rather than to the production process'').
We agree with the petitioners that it is appropriate to include
cash and stock bonuses to employees, directors and supervisors. The
amounts distributed, whether in the form of stock or cash, represent
compensation for services that the individual has provided to the
company. Therefore, in accordance with section 773(f)(1)(A) of the Act,
we have determined that it is appropriate to include these amounts in
the calculation of COP and CV. We acknowledge that the respondents'
treatment of these distributions as reductions to equity is in
accordance with Taiwan GAAP. However, we find that this treatment is
contrary to the requirements of section 773(f)(1)(A) of the Act, as it
does not reasonably reflect the respondents' cost of production because
the stock transferred to employees in exchange for their labor is a
cost to the company. See Final Determination of Sales at Less Than Fair
Value: Static Random Access Memory Semiconductors From Taiwan, 63 FR
8909, 8921-8922 (February 23, 1998)(``amounts distributed * * * whether
in the form of stock or cash, represent compensation for services which
the individual has provided to the company'').
Also, we agree with the petitioners that it is appropriate to
include R&D expenditures in the COP. R&D are the planned efforts of a
company to discover new information that will help create a new
product, process or technique. The R&D projects listed by the
respondents could benefit subject merchandise and are properly treated
as period expenses since their future benefit is undetermined.
We do not agree with the petitioners that Tien Tai's bad debt
expense should be included in the G&A expense calculation. Bad debt
expense results from the inability to collect payment from customers
for sales, and is appropriately accounted for as a selling expense. See
Final Results of Antidumping Duty Administrative Review: Porcelain-On-
Steel Cookware from Mexico, 63 FR 38373, 38381 (July 16, 1998).
We agree with the petitioners that it is correct to reduce the cost
of sales denominator in the G&A calculation to eliminate the effect of
inter-company transactions. It would be inappropriate to combine the
cost of goods sold of Kuang Tai and Tien Tai without adjustment,
because this would in effect double count cost of sales for those
transactions between the two companies (i.e., inputs sold to one
company which are used to produce another product would be included as
cost of sales at the input level and at the level of the final product
sold). For the final determination, we have eliminated from the cost of
goods sold denominator the value of sales between Tien Tai and Kuang
Tai based on the prices charged between the affiliates. See Final
Results of Antidumping Duty Administrative Review: Certain Cut-to-
Length Carbon Steel Plate from Brazil, 63 FR 12744, 12749 (March 16,
1998).
Finally, we agree with the petitioners that it is appropriate to
revise the cost of goods sold denominator used to calculate the G&A
ratio to exclude any packing costs not otherwise included in the cost
of manufacturing, to which the G&A ratio is applied. We have adjusted
[[Page 17339]]
the cost of goods sold determination accordingly.
Comment 3: Interest Expenses. The petitioners argue that the
Department should make the following revisions to the submitted
interest expense ratio: (1) reduce the cost of goods sold denominator
by the amount of revenue on the sale of scrap, since the reported cost
of manufacturing is also net of that revenue; (2) eliminate inter-
company transactions; and (3) revise the cost of goods sold denominator
to exclude any packing costs not otherwise included in the cost of
manufacturing.
The respondents contend that no adjustment is appropriate with
respect to scrap revenue. With respect to the elimination of inter-
company transfers, the respondents argue that the Department should
rely on the prices they paid for the inputs in question, rather than
the transfer prices paid to each other. The respondents do not address
the petitioners' argument with respect to packing costs.
DOC Position: We agree with the petitioners that the cost of goods
sold denominator should be reduced by the amount of revenue on the sale
of scrap, since the reported cost of manufacturing is also net of that
revenue. With respect to the elimination of inter-company transactions,
we also agree with the petitioners, and have eliminated the value of
sales between Tien Tai and Kuang Tai based on the prices charged
between the affiliates, for the same reasons explained with respect to
the calculation of G&A expenses in comment 2 above. Finally, we agree
with the petitioners that it is appropriate to revise the cost of goods
sold denominator used to calculate the interest ratio to exclude any
packing costs not otherwise included in the cost of manufacturing to
which the interest expense ratio is applied. We have adjusted the cost
of production denominator accordingly.
Comment 4: Product/Packing Form. The petitioners argue that the
Department should incorporate the ``product form'' into the model
matching hierarchy.5 According to the petitioners, the
pricing data submitted by Tien Tai and Kuang Tai indicate significant
price differences in otherwise identical products that are sold in
different product forms. In particular, the petitioners cite instances
of individual invoices with multiple transactions, where Tien Tai
charges consistently higher per-pound prices for small spools of a
given product than for larger spools of the identical product. The
petitioners further argue that, across the POI, comparison of weighted-
average prices also show price differences according to variations in
packing form and size. The petitioners contend that, given these price
differences, the Department can only achieve ``apples-to-apples''
product comparisons by taking product form into consideration in its
model matching.
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\5\ As the petitioners define it, the ``product form'' is
composed of three elements: packing form (e.g., a spool or a coil);
the packing material (e.g., in the case of a spool, metal or wood),
and packing size (e.g., in the case of a spool, the weight of the
spool plus wire).
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The respondents argue that, with rare exceptions, the ``product
form'' is generally not taken into consideration in the pricing of
them, and should therefore not be incorporated as a criterion in the
Department's model match. According to the respondents, the Department
confirmed at verification through examination of numerous invoices that
identical products packed in different forms and sizes had identical
gross unit prices. The respondents further contend that it is not
appropriate to infer a form/price relationship from a comparison of
weighted-average prices since prices can be significantly affected by
independent variables such as date of sale, customer, and quantity of
sale.
DOC Position: Based on the record of this case, we disagree with
the petitioners that it is appropriate to incorporate the ``product
form'' into the model matching characteristics.
At the outset of this case, interested parties were provided with
an opportunity to comment on significant product characteristics to be
incorporated into model matching. Neither the petitioners nor the
respondents made any mention of ``product form'' in their otherwise
detailed comments. (Nor, for that matter, did the respondents in the
companion investigations of round wire from Korea, India, or Canada
make any reference of product form as a possible matching criterion.)
Upon receipt and analysis of Tien Tai/Kuang Tai's sales data, the
petitioners filed a submission noting that for certain U.S. sales of
identical models on a given invoice there was an unexplained variance
in unit price, and surmised that the price variance might be due to
differences in product form. The petitioners did not provide any
evidence that product form is a pricing consideration in the wire
industry generally, instead focusing entirely on Tien Tai/Kuang Tai's
data.
The Department has sought, through supplemental questionnaires to
Tien Tai/Kuang Tai on this issue, as well as through extensive
examination of randomly selected sales documentation at verification,
to determine whether there was a distinct correlation between product
form and pricing contained in the sales data submitted by Tien Tai and
Kuang Tai. With respect to the first two elements of product form
(packing form and packing material), we have found no clear evidence of
a correlation with price in either the U.S. or home market.6
With respect to packing size, we have found that, on some invoices for
U.S. sales, Tien Tai charged its sole U.S. customer a premium for wire
sold in small spools relative to wire sold in larger spools. However,
Tien Tai/Kuang Tai has argued that this pricing pattern is unique to
the transactions in question, and the record does not suggest
otherwise. Indeed, counsel for the petitioners themselves conceded at
the case hearing that there was no conclusive evidence of a
relationship between packing form and pricing with respect to Tien Tai/
Kuang Tai's home market sales. See Case Hearing Transcript at 132.
Given the above, we do not believe the record supports the
incorporation of product form as a matching criterion.
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\6\ The comparisons provided by the petitioners do not account
for a number of factors, most notably differences in customers and
time. Moreover, there are numerous examples on the record, including
many found through random search at verification, of identical
products packed in different forms/materials that have the same unit
price.
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Comment 5: Reporting of Packing Costs. The petitioners allege that
the respondents' claim for a home market packing adjustment should be
denied because Tien Tai/Kuang Tai did not take into account that
certain packing materials were reused, thus overstating packing costs.
The petitioners further allege that there were several discrepancies in
the reported home market and U.S. packing costs.
The respondents argue that their packing costs were correctly
reported and verified, and should be relied upon in the final
determination.
DOC Position: We disagree with the petitioners' assertion that the
cost of reusable packing materials in the home market was overstated.
As noted at verification, Kuang Tai recycled metal bobbins used in home
market sales. See Tien Tai/Kuang Tai Cost Verification Report at 7
(referring to Kuang Tai's use of ``metal spools'', i.e., metal
bobbins). Kuang Tai did not include any cost for the metal bobbins in
the reporting of home market packing costs. See Sales Verification
Exhibit KT-15. Thus, if anything, the cost of the Kuang Tai's recycled
metal bobbins was conservatively understated by the respondents.
[[Page 17340]]
With respect to the other miscellaneous discrepancies alleged by
the petitioners, we note that at verification we found evidence of only
a single error, which involved the over-reporting of home market
packing costs for KW 25KG products. We have corrected this error for
the final determination.
Comment 6: U.S. and Home Market Credit Expenses. The petitioners
argue that the respondents misreported their U.S. and home market
credit expenses. According to the petitioners, the Department should,
as facts available, disregard Tien Tai/Kuang Tai's claim for a credit
expense adjustment for its home market sales, and rely on the highest
reported credit expense as facts available for the respondents' U.S.
sales.
The respondents argue that there is no basis for applying facts
available to their credit expenses. They contend that they revised
their U.S. credit expenses in a timely manner at the outset of
verification, and that the mistakes with respect to home market credit
expenses were minor and correctable based on verification findings.
DOC Position: We disagree with the petitioners that the application
of facts available is appropriate. The respondents identified an error
with respect to U.S. credit expenses at the outset of verification, and
provided verifiable corrections. An error with respect to home market
credit expenses was identified at verification, but it can be easily
corrected based on revised data obtained and examined during the
verification. For a detailed explanation of the correction of these
errors, see the Tien Tai/Kuang Tai sales analysis memo from Sanjay
Mullick to Kris Campbell, dated April 2, 1999.
Comment 7: Double-Counting of Packing Costs. Kuang Tai argues that
it inadvertently included packing costs in the pool of manufacturing
costs allocated to all of its products, such that packing costs have
been reported both in the cost of manufacturing and as a separate
packing adjustment. According to the respondent, the error was not
detected at the cost verification, but the exhibits taken during the
verification establish that packing is in fact double counted. Kuang
Tai requests that the Department remedy this double counting by
removing packing from the cost of manufacturing.
The petitioners argue that the verification exhibits do not
establish the error claimed by the respondent, and moreover, that any
such error would call into question the general reliability of the
submitted cost data. Further, the petitioners argue that Kuang Tai's
claim reveals that the respondent did not allocate any overhead to
packing costs. According to the petitioners, the Department should
reject the respondent's request, and apply total adverse facts
available. In the alternative, the petitioners propose that the
Department apply partial facts available with respect to packing
overhead.
DOC Position: We agree with Kuang Tai that the verification record
establishes that packing was double-counted. (For an explanation of our
analysis of the record in this regard, please see the Tien Tai/Kuang
Tai cost analysis memorandum, from Peter Scholl to Neal Halper, dated
April 2, 1999). Therefore, we have eliminated packing expenses from
Kuang Tai's reported cost of manufacturing. As for the petitioners'
argument with respect to packing overhead, we note that Kuang Tai was
unable to allocate any overhead specifically to packing, but did
allocate total overhead to cost of manufacturing, such that the
overhead expenses were nonetheless included in the reported costs.
B. Rodex
Comment 1: Facts Available. The petitioners argue that the
Department should apply facts available for certain omissions and
errors found at verification, namely (1) unreported U.S. and home
market sales; (2) U.S. sales of wire for which no coating had been
reported, but which were coated with Apex, a lubricant; (3) packing
expenses, the reporting of which was found to contain errors; and (4)
duty drawback, the calculation of which contained errors. The
petitioners contend that the Department should not simply correct these
errors by relying on data collected at verification, but rather apply
adverse facts available.
Rodex argues that use of adverse facts available is unwarranted, as
the omissions and errors cited by the petitioners were minor in nature
and corrected at the preliminary determination through use of verified
data on the record.
DOC Position: We agree with Rodex that the application of adverse
facts available is not warranted. Unlike the cases cited by the
petitioners in which the Department applied best information available
(the precursor to facts available under the pre-URAA antidumping
statute), the omissions and errors referenced by the petitioners in
this case were, both individually and in the aggregate, minor in scope
and immaterial. While the general purpose of verification is not to
gather new information, but rather to verify the information already
submitted, it is the Department's practice to correct minor errors
found at verification. See Notice of Final Determination of Sales at
Less Than Fair Value: Static Random Access Memory Semiconductors from
Taiwan, 63 FR 8909, 8929 (February 23, 1998). Moreover, to the extent
that Rodex identified several of the minor errors in question at the
outset of verification, it did so at the Department's specific
instruction to identify any clerical errors at that point. See letter
from the Department of Commerce to Rodex, dated November 15, 1998,
(transmitting sales verification agenda), at 1.
With respect to the first point raised by the petitioners, the
Department noted at verification that the respondent had not reported a
relatively small number of sales, which had dates of sale in the POI
but date of invoice after the POI.7 Because the sales in
question were few in number, the Department collected and verified the
sales data for these transactions. We have continued to rely on the
sales data in question for this final determination.
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\7\ The error was due to a misunderstanding arising from the
Department's supplemental instruction to Rodex to change the basis
for date of sale. In its first questionnaire response, Rodex based
the date of sale on the date of invoice. After determining that the
date of sales confirmation was a more appropriate basis for the date
of sale, the Department instructed Rodex to revise its sales
databases accordingly. Although Rodex complied with this request by
reporting the date of sales confirmation for all previously reported
sales, it did not additionally report certain sales with date of
sales confirmation within the POI and invoice date outside of the
POI.
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The Department also found at verification that four U.S. sales
reported as having no coating had in fact been coated with Apex. We
verified that no other U.S. sales, and no home market sales, were
coated with Apex. See Rodex Sales Verification Report at 4. Because the
omission in question was minor and remedied through verified data,
there is no need for the application of adverse facts available.
With respect to packing costs, we found at verification that a few
home market sales had been shipped in reusable containers. In the
preliminary determination, we set the packing cost for such sales to
zero and increased the reallocated total packing costs to the other
sales, which resulted in a small increase to packing costs. Again, to
the limited extent that the error created any distortion in the margin
calculation, that distortion was fully corrected.
As for duty drawback, the calculation errors in question were also
very minor (accounting for a discrepancy of less than one-tenth of one
percent), and were identified by the respondent at the outset of
verification as a clerical error.
[[Page 17341]]
We have therefore relied on the corrected duty drawback expense
calculation provided by Rodex at verification.
Comment 2: Potential Reimbursement of Antidumping Duties. The
petitioners contend that Rodex agreed to reimburse its customers for
payment of potential antidumping duties. According to the petitioners,
the Department should deduct the amount of calculated duties from the
export price to determine the cash deposit rate to be applied to
Rodex's entries.
Rodex argues that it has not to date reimbursed any customer for
antidumping duties, since there has never been an antidumping duty
order on round wire. Rodex contends that it was unaware of the
Department's regulations at the time that it expressed a willingness to
reimburse its customers for potential antidumping duties, and that in
the event that an antidumping order is imposed, it will not reimburse
any duties.
DOC Position: We disagree with the petitioners that the Department
should adjust the export price for potential reimbursement of
antidumping duties. Section 351.402(f)(1)(i)(B) of the Department's
regulations provides that the Department will deduct the amount of any
antidumping duty which the producer reimbursed to the importer. For
that provision to be triggered, an antidumping duty order must have
been imposed, and antidumping duties levied. Since neither of those
events has occurred to date, the provision is not applicable in this
case. In the event that an antidumping order is imposed pursuant to
this final determination, and administrative reviews of that order are
requested, the Department will closely examine whether Rodex has
reimbursed, or agreed to reimburse, its customers for antidumping
duties in the relevant period of review.
Comment 3: Year-End Auditor's Adjustment. Rodex argues that the
Department made two errors in the allocation of net foreign exchange
losses to wire products. First, Rodex alleges that the Department
transposed the amounts to be allocated with respect to direct labor and
overhead. Second, Rodex alleges that the Department inadvertently
allocated the full amount of the losses to wire products, even though
the company produced other products.
The petitioners do not dispute Rodex's allegation of a
transposition error. However, the petitioners contend that since the
auditor's adjustment had not been reported to the Department and was
found at verification, the Department should make an adverse inference
and allocate the adjustment fully to wire products.
DOC Position: We agree with Rodex. We have corrected the
transposition error, and, since the adjustment in question applies
equally to all of Rodex's products, have reallocated the adjustment to
both wire and Rodex's other product lines.
Comment 4: Net Foreign Exchange Losses.
Rodex argues that the Department incorrectly allocated net foreign
exchange losses only to wire products, rather than to all of Rodex's
products, which include fasteners. Rodex also argues that the
Department erred by applying the amount of foreign exchange losses as
an upward adjustment to raw material cost, rather to G&A expenses,
since the expenses are classified as non-operating general expenses in
the company's records.
The petitioners respond that the Department correctly adjusted for
net foreign exchange losses, and that it is the Department's normal
practice to include foreign exchange gains and losses relating to raw
materials in the calculation of total raw material costs.
DOC Position: We agree with the petitioners. All of Rodex's
products, including both wire and fasteners, are made from wire rod.
Since Rodex suffered net foreign exchange losses in connection with
purchases of rod, we allocated those net losses to all wire rod
purchases, thus increasing equally the material costs of both wire and
fasteners. With respect to the classification of these expenses, we
note that the losses arise directly from purchases of materials, and it
is the Department's practice to adjust material costs for exchange
losses related to purchases of materials. See, e.g., Circular Welded
Non-Alloy Steel Pipe and Tube from Mexico: Final Results of Antidumping
Duty Administrative Review, 62 FR 37014, 37026 (July 10, 1997).
Therefore, we have adjusted material costs, rather than G&A expenses,
for the exchange losses.
Suspension of Liquidation
In accordance with section 735(c)(1)(C) of the Act, we are
directing the Customs Service to suspend liquidation of all entries of
stainless steel round wire from Taiwan produced and exported by Tien
Tai/Kuang Tai that are entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final
determination in the Federal Register. Also, in accordance with section
735(c)(1)(B) of the Act, we are directing the Customs Service to
continue to suspend liquidation of all entries of stainless steel round
wire from Taiwan from all other producers and exporters that are
entered, or withdrawn from warehouse, on or after November 18, 1998,
the date of publication of the preliminary determination in the Federal
Register. The Customs Service shall require a cash deposit or the
posting of a bond equal to the weighted-average amount by which the
normal value exceeds the EP, as indicated in the chart below. These
instructions suspending liquidation will remain in effect until further
notice. The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
Exporter/Manufacturer average margin
percentage
------------------------------------------------------------------------
Rodex................................................... 3.94
Tien Tai/Kuang Tai...................................... 4.75
All Others.............................................. 4.47
------------------------------------------------------------------------
Section 735(c)(5)(A) of the Act directs the Department to exclude
all zero and de minimis weighted-average dumping margins, as well as
dumping margins determined entirely under facts available under section
776 of the Act, from the calculation of the ``all others'' rate. Since
neither of the calculated margins in this investigation are zero, de
minimis, or based entirely under facts available, we have included both
margins in the calculation of the all others rate.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
International Trade Commission (ITC) of our determination. As our final
determination is affirmative, the ITC will, within 45 days, determine
whether these imports are materially injuring, or threaten material
injury to, the U.S. industry. If the ITC determines that material
injury or threat of material injury does not exist, the proceeding will
be terminated and all securities posted will be refunded or canceled.
If the ITC determines that such injury does exist, the Department will
issue an antidumping duty order directing the Customs Service to assess
antidumping duties on all imports of the subject merchandise entered,
or withdrawn from warehouse, for consumption on or after the effective
date of the suspension of liquidation.
This determination is published pursuant to sections 735(d) and
777(i)(1) of the Act.
[[Page 17342]]
Dated: April 2, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-8927 Filed 4-8-99; 8:45 am]
BILLING CODE 3510-DS-P